Brussels refuses to decouple the price of gas from electricity

The European Commission will propose today to the Governments to redirect 40,000 million euros not spent corresponding to the cohesion fund between the years 2014 and 2020 and dedicate them to support households and small and medium-sized companies to face the energy crisis.

Thomas Osborne
Thomas Osborne
18 October 2022 Tuesday 02:42
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Brussels refuses to decouple the price of gas from electricity

The European Commission will propose today to the Governments to redirect 40,000 million euros not spent corresponding to the cohesion fund between the years 2014 and 2020 and dedicate them to support households and small and medium-sized companies to face the energy crisis. The measure appears in the draft of the communication that the community executive will approve this afternoon, to which this newspaper has had access, and has been defended this morning by the European Commissioner for Cohesion, Elisa Ferreira.

"There are those who say that this is not a crisis instrument, but we have already had to react when citizens have been affected by several unexpected crises. We cannot ignore the difficulties that Member States, SMEs and families are going through with prices of current energy", during a press conference in Strasbourg on the sidelines of the plenary session of the European Parliament.

The European Commission proposes in its communication to dedicate up to 10% of the funds of the last budget period, 40,000 million euros still accessible with conditions, to support measures for SMEs, vulnerable households and employment programs, among other initiatives. In the case of Spain, the cap on unspent funds that could be dedicated to this type of measure rises to 3,500 million euros. Brussels proposes that the money can be spent more flexibly, for example with a co-financing rate that can cover up to 100% of the cost, and without limitations on the type of regions in which they can be used.

The chairman of the European Parliament's Regional Development Committee, Younous Omarjee, backed the proposal. But the relaxation of the use of these funds, although it will be a relief for many countries, will hardly compensate for the growing bad mood that exists among a majority of countries due to the reluctance of the European Commission to propose certain measures to tackle the cost of electricity.

The communication that will be approved today by the institution chaired by the German Ursula von der Leyen once again illustrates to what extent the division of opinions between the different countries of the European Union on how to cushion the impact of the high price of gas on what consumers pay for electricity has a brussels effect. To the disappointment of countries such as France, Belgium and Romania, the draft communication on energy that the European Commission plans to approve today does not include any initiative to temporarily decouple the price of gas from electricity.

The absence of proposals in this regard is striking, especially after its president, the German Ursula von der Leyen, committed a few days ago in her roadmap on how to respond to the energy crisis to propose an initiative in this regard. Although among the Twenty-seven there is a large majority of countries that demand measures of this type, in the wake of what was agreed before the summer by Spain and Portugal, Germany and the Netherlands continue to resist. The matter is delicate and could have enormous economic repercussions, which is why Von der Leyen aspires to reach an almost total consensus that continues to resist him.

The document insists that although putting a cap on the price of gas used to generate electricity “has lowered prices in Spain and Portugal”, its introduction at a community level “involves risks”. Any solution that is taken must lead to a reduction in consumption, emphasizes Brussels, which does not believe that the increase in gas demand this summer in the Iberian Peninsula was due only to environmental factors.

The community executive is currently proposing alternative measures, such as a temporary reform of the reference index used by European gas operators, the TTF, which would consist of setting a dynamic price band to limit volatility from one day to the next and avoid peaks in other markets. Brussels is committed to having a new alternative index ready in six months that better reflects the conditions of the gas market, now most of the imports reach the EU in liquefied form, not by pipeline.

Brussels, which is holding talks with Norway to stabilize the markets, is also proposing to promote joint gas purchases for next year, in time for when the countries start filling their reserves, which will probably run out this winter. His proposal is that at least 15% of purchases be made through the new platform, which should allow the EU to obtain better prices.